EU to present 'electroshock' digital tax plan by March

Under EU law, tech giants can choose to report income in any member state (AFP)

The European Commission intends to present by the end of March its plan for overhauling tax rules for internet giants, aimed at making them pay up in the countries where they earn their profits.

The commissioner for economic and financial affairs, taxation and customs Pierre Moscovici told France's Radio J on Sunday the proposal would "create a consensus and an electroshock" on taxing digital economy revenues.

Under EU law, tech giants can choose to report their income in any member state, prompting them to pick low-tax nations such as Luxembourg, Ireland or the Netherlands.

On average internet giants pay a tax rate of 9% in Europe, compared with an average corporate rate of 23%, Moscovici said.

"Nobody can deny it: our tax framework does not fit anymore with the development of the digital economy or with new business models,” Moscovici said in October 2017.

"Member states want to tax the huge profits generated by digital economic activity in their country. We need a solution at EU level, bringing robust solutions for businesses and investors in the single market," he added at the time.

The Commission's preferred option is to change the way digital companies are taxed through its broader Common Consolidated Corporate Tax Base (CCCTB) proposal, which would use the firm's assets, labour and sales to calculate where its value is created, and tax the firm accordingly.

In light of the EU's plans to act on the taxation of digital companies unilaterally, Ángel Gurría, secretary general at the Organisation for Economic Cooperation and Development (OECD) has emphasised the importance of acting "together".

At the end of January, Gurría told Euractiv that action on the taxation of digital companies should be taken collectively and internationally, as opposed to particular countries or regions, such as the EU.

The OECD is due to release a report in April on how it thinks digital companies such as Google and Amazon should be taxed.

"Let's hold our horses and look at the enormous importance of doing this after widespread and worldwide consultation, [with no single] region of the world doing its own thing," Gurría said.

He said certain parties should avoid acting with the short-term future in view, as it would block the OECD from "applying long-term solutions".

Luxembourg prime minister Xavier Bettel has previously said he was opposed to taxing the turnover of large internet companies because it would "indirectly hamper our competitiveness and our growth and penalise our labour market".

The Grand Duchy, Ireland, the Netherlands and Malta already rejected EU Commission proposals that aimed to tax companies on turnover.

Bettel said in September that Luxembourg was "open to the discussion on digital taxation but within the framework of the OECD".